ABSTRACT
One way to insulate monetary policy from day-to-day political pressures is to give the central bank a more independent structure. In this respect, the Fed ranks toward the top among the world’s central banks. In the case of the US, the goals are laid out in the Humphrey-Hawkins Act. In addition, the Chairman, the Governors, and the Reserve Bank Presidents give testimony before Congress on a number of issues. Furthermore, the Fed meets regularly with senior Administration officials to discuss one another’s respective economic programs. Since 1990, the governments of New Zealand, Canada, and the United Kingdom have worked with their respective central banks to adopt specific low-inflation targets. And, so far, all three countries have achieved their inflation objectives. The example of Japan drives home the point. The Bank of Japan has neither political independence nor formal inflation mandates.
